Does Targeted Advertising Work in 2015?

Jay is a digital marketer and producer whose creative and technical skills have developed digital brand strategies and sales campaigns using a range of complex internet applications from stand-alone websites through to Facebook API integrations.

In 2015, online advertising has increasingly become targeted to users – even Apple may be aiming to do this based on your wallet’s capacity. In response, many consumers have turned to ad blockers and tracking protection tools to limit their exposure to online ads.

So if targeted marketing is becoming more personalised, why are more users turning to ad blocking tools? And why is the trend from consumers today to block the very ads that marketers thought they desired?

A little history

For a while, web ad blocking was available, but its use was quite rare. Early ad blocking tools (Internet Junkbuster, AdSubract) were just as effective as the ad blockers of today, and at dial-up speeds also made browsing a lot faster. Yet a survey by Forrester Research found that before 2002, only 1% of users were actually using ad blockers.

By 2010, however, an article titled What They Know brought an awareness of ad targeting and since then the knowledge has gradually gone mainstream. In 2012 a report by ClarityBay stated that “9.26 percent of all ad impressions on 100 popular sites are being blocked.” So why the shift towards ad blocking?

The trend today

A report in 2015 tells us that print still “pulls in about ¾ of the web’s revenue in one sixth of the time.” So compared to print, the value of the web as an advertising platform is staying relatively low in relation to time spent. And mobile ads which are even more targetable than web ads, have even less value to advertisers.

Print advertising still holds a tight marketing grip – it’s easier to place an ad based on content, but harder to track the individuals. I know, I know – harder to track individuals could not possibly be a good thing right?

So how can the web become as valuable to advertisers as print has been? To begin answering this, I’d like to share some top-notch Nobel Prize economic research that still resounds to this day.

How to survive “information asymmetry”

Dr. George A. Akerlof in The Market for Lemons: Quality Uncertainty and the Market Mechanism wrote: “Indeed, I soon saw that asymmetric information was potentially an issue in any market where the quality of goods would be difficult to see by anything other than casual inspection. Rather than being a handful of markets, the exception rather than the rule, that seemed to me to include most markets.”

A good example of this is the job market for computer programmers. How does an employer find someone who not only interviews well and sprints through programming puzzles in flying colours, but who can also actually add real value to a complex project?

When it comes to advertising, anyone who buys or sells anything has to spend a lot of time getting around this asymmetric problem. Deceptive sellers learn new tricks, while buyers and honest sellers find new ways to funnel out deception. It’s an ongoing challenge that requires constant updates and improvements, very similar to the motor that runs digital marketing. Today, a CIO’s signup for a site license can be compared to a tourist trying to buy a genuine Louis Vuitton purse from a street vendor.

Akerlof also wrote: “Dishonest dealings tend to drive honest dealings out of the market.” Along the same lines, how can ads, as abundant as they are nowadays, inspire trust? The main reason ad blocking has become a trend with consumers is due to a lack of trust. The web still feels very unregulated and free, so as a consumer, you want to weed out the cheap ads right from the start.

Can targeted advertising help honest buyers and sellers to find each other?

A really insightful article by Evan Davis, John Kay and Jonathan Star titled Is Advertising Rational states: “Advertising is not a process by which gullible consumers are persuaded to buy things they don’t want… Instead, it furnishes consumers with some useful information. It is not so much the claims made by advertisers that are helpful, but the fact that they are willing to spend extravagant amounts of money on a product that is informative.”

In other words, quality targeted advertising itself may well correlate with authenticity.

What is truly needed is a way of extracting truthful information from producers and distinguishing those who limit themselves as door-to-door salesmen from those who go beyond and truly believe their product to be of high quality.

Advertising signalling is an action that sends a credible message to a potential consumer. A manufacturer will always know more about their product than a consumer, so going above and beyond just the standard pay per click is a reliable sign of their own confidence in it. Strong advertising signals tend to demonstrate to consumers that production costs and the demand for the product are enough for advertising costs to be recovered. Nevertheless, let’s not forget that when it comes to digital marketing, products and marketing campaigns will always undergo testing and rely on the fluctuation and unpredictability of the market.

So is targeting advertising worth it in 2015?

In essence, advertising enhances buying opportunities of potential consumers by informing them of products they know little of, but a perceived expense in targeted ads is an important direct predictor of a brand choice. Knowing how much capital a company has thrown down for a targeted ad campaign helps consumers distinguish between the big, stable companies and the smaller, up-and-coming ones. This assures the consumer whether or not the product is here to stay and it can be critical with more complex products such as software and electronics.

Bottom line, when it comes to target advertising in 2015, unless you’re willing to go above and beyond with your targeted ads spending, then it’s most likely to either get blocked or fall under “banner blindness” – when consumers become so subliminally accustomed to the visual presence of web ads that they begin to tune them out altogether.

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